2nd Aug 2017 LonRes* Sales market overview – Summer 2017.

Buyers in prime areas of London remain in something of a quandary. Do they buy now, and take advantage of lower prices and less competition, or hold off and risk missing out?

This quarter, as we saw in the first three months of the year, tax changes and political uncertainty continue to impact the market. The second quarter last year was bookended by the 3% stamp duty (SDLT) levy for additional properties and the EU referendum. This year, the April announcement of a snap general election in June, added further uncertainty to a market which was already challenging. All this makes deciphering what is happening to the prime market more difficult than usual.

Transactions

The first half of the year finally saw some positive news emerging from prime central London. A combination of more motivated and realistic sellers and lower prices has tempted more buyers into purchasing in prime central London this year. Indeed, the number of properties sold in the first six months of 2017 was up 3% on the same period a year ago. Prime London and prime fringe, which saw a more significant spike in sales last year surrounding the 3% stamp duty levy, still saw fewer transactions, down 12% and 16% respectively in H1 2017 compared with the same period a year ago.
It is smaller properties, popular with investors and second home purchasers, now liable for the addition 3% SDLT levy, which have seen the most significant fall in volumes sold over the last 12 months. Comparing sales in the year to June this year with the previous 12 months shows, across our three areas, a 29% fall in the number of studio and one-bedroom flats sold. This compares to a 13% reduction for flats with three or more bedrooms and 14% fall in the number of houses. Results from our latest survey support this, with just 12% of agents reporting an increase in demand from buyers now liable for the additional 3% SDLT levy.

Impact on prices

Comparing prices, quarterly figures, for reasons stated above, are more erratic. However, looking at half year averages suggests all three of our prime areas have seen achieved prices fall. Prime central London values were, on average, 4.4% lower in the first half of 2017 (-6.8% for Q2) compared with the same period a year ago. Prime London and prime fringe also saw a reduction in achieved prices, albeit more modest, down 0.8% in prime London and 2.5% in prime fringe.
Prospective buyers, many of whom had been complaining about lack of suitable properties on the market, now have more choice. Comparing the number of properties on the market at the start of July shows prime London and prime fringe saw an increase in available of properties of 11% and 13% respectively, with a smaller increase of 4.5% across prime central London.

(*LonRes is an exclusive subscriber network strictly limited to known and established property professionals and the definitive source of property data for central London).